Financial services ETFs have been among the top-performing sector funds, both in recent months and year-to-date. In the past 90 days, the Financial Select Sector SPDR (NYSEArca: XLF) is up 9.4% while the iShares U.S. Financials ETF (NYSEArca: IYF) is higher by 7.9%. Year-to-date, those returns are 24.2% and 23.2%, respectively.
With Dow component J.P. Morgan Chase (NYSE: JPM) and Warren Buffett favorite Wells Fargo (NYSE: WFC) slated to get bank earnings rolling Friday before the opening bell, investors may want to get acquainted with bank ETFs if they have not done so already. [ETF Chart of the Day: Financials]
Investors do not need to steer away from familiar names to find an ETF that might be providing clues about what the market expects from big banks this earnings season and out of the group going forward. XLF, the largest financial services ETF assets under management and the second-cheapest with an expense ratio of 0.18% per year, could be the play to embrace. [Financial Services ETFs Hanging in There]
Options activity, particularly in the August 20 puts, has recently increased in the ETF, though that is not necessarily a bearish sign. Professional traders could be using those puts to hedge long positions in XLF components or the ETF itself.
Options trade is not the only noteworthy activity surrounding XLF in recent days. On Wednesday, the ETF saw inflows of $493.2 million, or an AUM jump of 3.23%, according to Index Universe data. On that day, only the SPDR S&P 500 (NYSEArca: SPY) took in more new cash among ETFs.
Wednesday’s asset accumulation was not a one-off affair for XLF as the ETF has been one of the top asset-gathering funds this year. In fact, XLF is ranked third among all U.S. ETFs with year-to-date inflows of over $4.3 billion, according to Index Universe. Only the WisdomTree Japan Hedge Equity Fund (NYSEArca: DXJ) and the iShares MSCI Japan ETF (NYSEArca: EWJ) have drawn in more new assets among U.S. ETFs than XLF.